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The number of input tax credit (ITC) fraud cases under Goods & Services Tax (GST) in the first 9 months of this financial year 2019-20 , has risen 170% more than that reported in the whole of last fiscal.
According to a Parliamentary Committee report, the number of ITC fraud cases, based on fake invoices during April-December of this fiscal, is 5,986. This number was 2,211 in the 12 months of FY 2018-19. In terms of amount involved, the first 9 months of this fiscal recorded over ₹13,000 crore while recovery was nearly ₹550 crore. During FY 2018-19, the total quantum was nearly ₹10,400 crore, while recovery was a little over ₹800 crore.
During the first 10 months (April-January) of the current fiscal, the number of cases was 8,335 with nearly ₹30,000 crore involved and the total recovery was nearly ₹15,000 crore. During fiscal 2018-19, the number of cases booked was over 7,300, amount involved about ₹38,000 crore and recovery nearly ₹19,000 crore.
The Committee noted that system-based analytical tools and intelligence of the Directorate General of Analytics and Risk Management are being used to curb evasion in GST. It is to be noted that intensive anti-evasion efforts are being taken, particularly with respect to ITC frauds based on fake invoices.
However, States have been reporting losses in collection, which will only increase the compensation burden of the Centre. During the current fiscal, the total target for collection of GST compensation cess is a little over ₹1.09-lakh crore, while the net collection during April-December was over ₹70,000 crore. However, GST compensation, released as per budget provision, and the actual requirement of States for the April-September period has exceeded ₹81,000 crore.
Now, in the upcoming meeting tomorrow, States are likely to raise the issue of compensation cess and discuss ways to resolve issues related to the inverted duty structure (when indirect taxes on raw material are higher while on finished products lower), which results in outflow as refund.